Dennis Potgraven
Nov 19, 2018

Better cities, new paths for brand growth in China

Brands have a choice: Cater to the mindless consumers of old and keep adding to economic and ecological issues, or focus on creating products and services that help people feel good about the things they buy.

Hangzhou
Hangzhou

Infrastructure, traffic jams, higher cost of housing, climate change, population growth, waste management—these are just a few of the many challenges that cities in the world, including cities in China, grapple with. The prefix of the word 'smart' to cities often changes the imagery, a bit, as we get whisked away to a land where flying cars navigate almost virtual motorways, buildings reach high into the clouds—scenes straight out of a Hollywood sci-fi blockbuster. While, the reality is very different, we have to admit that smart cities are more than a trend—they're the wave of the future.

With 60% of the world population predicted to live in cities by 2050, smart cities embody our intent to survive despite the associated challenges of urban living. China is a country with one of the highest rates of urbanization. The percentage of population living in urban areas was 56.1% in April of this year, with a target rate of 60% already by 2020. By 2025, China will have 221 cities with more than 1 million inhabitants, compared with 35 cities of this size in Europe today. At the same time, China will have 23 cities with more than 5 million people.

The above statistics perhaps explain why China is regarded as a front-runner in championing smart cities, with over 500 smart-city pilots under its belt. While, the scale of China’s urbanization promises substantial new markets and investment opportunities for companies in China and around the world, for residents—and economies—to thrive in the cities of tomorrow, radical change is needed. And brands can play a huge role in the transformation.

Consumerism and its impact

The relationship between brands and sustainability is a subject of constant discussion. We are already consuming resources at an alarming rate, and quicker than our planet is able to replenish them. Along with obvious social and economic problems, consumerism is impacting our environment—which does not bode well for the sustainable growth of cities. One of the key triggers behind the growing consumerism is the burgeoning middle class. In China, 75% of middle class will live in the upcoming tier 2 and tier 3 cities.

At a deeper level, the role of brands is intrinsically connected to consumers seeking to strike a balance between guilt and pleasure. As revealed in a recent Havas Group Prosumer study, New Cities, New Lives, nearly seven in 10 'prosumers' (our word for today’s leading influencers and market drivers) and 63% of millennials often wish it were easier to decide which product to buy, instead of feeling overwhelmed by the product choices in the supermarket. How should brands respond to this shift?

In China, people would not care if 52% of brands were to disappear overnight. In part, that comes down to the fact that most brands are failing to meet modern consumers' heightened expectations, which are all about meaningfulness—how a product, service or brand improves the quality of life. This applies at both the personal level and at a collective level. At a collective or environmental level, the city is closest and most important to our consumer. Then there is the growing concern over homogeneity. How many times have you walked through urban shopping districts featuring the same storefronts and same restaurants offering the same food? Waste from online shopping is also high in China, which has a negative effect on the quality of life due to the associated problems of traffic and rubbish on the streets.

Brands have a choice: cater to the mindless consumers of old and continue to add to the economic and ecological issues that keep so many up at night, or focus instead on creating products, services, and communications that help people feel good about the things they buy. Brands have a real and tangible opportunity to offer differentiated products and services and influence how society develops.

The role of brands in smart cities

72% of prosumers in China indicated that they would like their favourite brands/companies to play a bigger role in their local community. While, brands have the potential to harm cities, they are also uniquely positioned to solve the biggest urban challenges, by leveraging technology. The relationships between people and objects are changing. In recent years, we have seen apps such as Didi and Mobike emerge, which highlight the usage of data to solve a problem.

Alibaba, which has been helping businesses and residents thrive through AliPay, unveiled its smart city project focussing on the Hangzhou province in 2016. The project addressed the primary concern of citizens—traffic and congestion—by introducing measures to reduce traffic congestion and provide real-time traffic updates. In fact, the biggest companies in China—the holy trinity of BAT (Baidu, Alibaba, Tencent) are positioning themselves to become global leaders in smart-city solutions, autonomous driving, conversational AI, and predictive healthcare. China’s collaborative approach of leveraging the strengths of its top technology companies is a smart trend for the substantiality of future cities—a trend that sets a positive example for other nations.

Meaningfulness and connection in the city

People are seeking to be the change they want to see in the world: Only around one in five prosumers (globally) agrees that “Nothing I do to try to help the planet is going to make a difference”. Consequently, 86% of prosumers—and 76% of the mainstream—are shopping more carefully and mindfully than they used to.

Maximizing profits will always be the essential focus of most businesses. However, we are seeing more and more that melding profits with a greater purpose and helping people to make choices they feel good about has the potential to create far more meaningful connections between people and brands.

In China, the move towards improving product quality and convenience to impact a consumer’s life positively has been taking shape, and the next level of growth will be on how brands can improve the environment or the cities where their consumers reside. Once these connections are in place, it will not only set the path for growth in China but also ensure that brands and cities thrive over the long term.


Dennis Potgraven is chief strategy officer for Greater China with Havas Group.

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